Introduction

Cities typically
obtain their electric and gas services either from municipal utilities
or under contract from utilities that provide power to a much wider
service territory. A few cities still derive their power from Rural
Electric Co-ops.

Many of the best
efficiency programs in the nation have come from municipally owned
utilities. The programs profiled elsewhere in this manual of Osage,
Iowa, Seattle City Light, Sacramento, California, and Burlington,
Vermont are representative of the sorts of programs that a “muni” can
offer. The difference between the efficiency programs offered by munis
and those of “Investor owned utilities” has been so stark that many
citizens have begun efforts to municipalize their service territory.[1]

But in truth, the
privately held utilities can offer excellent efficiency and renewables
programs, as well. In the 1980’s Southern California Edison found it
cost effective to give away over a million compact fluorescent light
bulbs. The energy saved this way was cheaper than just running SCE’s
existing power plants. Utilities like Burlington Electric lease
efficient light bulbs to their customers for pennies a month and give
free replacements. Not only does this keep the bulbs from being thrown
away, it enables customers to pay for the efficiency over time.
Burlington’s Smartlight program has 65,000 bulbs in circulation serving
over 7,000 homes, achieving an annual savings of over $390,000.

For many years it
was believed that it was in the financial interest of utilities to build
more power plants. Indeed, until the early 1970’s every new plant lowered costs for
everyone in the system. Utility regulations were structured to reward
building more plants, customers were urged to buy “All Electric Homes”
and incentives were given to use more electricity. For a variety of
reasons, this is no longer true: every new plant that is added to a
system raises every customer’s rates, and has for almost 30 years. In
many states, however, utilities are still rewarded for building more
plants.[2]

Various states have
experimented with regulations to encourage utilities to meet customers’
needs in the cheapest way. Programs like Integrated Resource Planning,
which require utilities to compare the cost of building new capacity
with the cost of doing the same job of meeting customers’ needs through
energy efficiency, sought to level the playing field.[3]
Every competent analysis has shown that efficiency costs far less than
new supply. For example, good efficiency programs, to, say, retrofit
light bulbs, cost about 1 - 2¢ per kilowatt hour saved, while just
running a coal plant costs 4 – 5 ¢. New wind, in good sites can cost as
low as 3¢. Running an existing gas plant typically costs 5 – 6¢. The
average price of electricity from the grid is at least 8¢ per kilowatt
hour, and building a new nuclear plant can cost as much as 20¢. And
these numbers do not count the cost of emitting carbon and threatening
the climate.

Obviously, it is in
everyone’s interests to pursue efficiency first, but few utility
programs achieve this outcome. Until recently, utilities have tended to
pursue only as much efficiency as regulators require them to. Only a
few jurisdictions decoupled sales of electricity from utility profits,
so utilities will no longer be rewarded for selling more electricity nor
penalized for selling less.

There have been
some notable exceptions. In California in the late 1980’s, the Public
Utility Commission shifted its regulations to reward utilities with a
portion of the savings they created for their customers by implementing
efficiency. Within a few years, no utility in California projected the
need to build any more power plants, and all projected that they would
meet all future demand growth through renewable generation. Under this
plan Pacific Gas and Electric, the country’s biggest private utility,
spent $150 million in 1991 to help make its customers more efficient,
and kept 15% of the resulting savings, boosting its 1990 profits by
$40-50 million. Doing this returned over $40 million to PG&E’s bottom
line and saved its customers nine times that much. The PUC found that
between 1990 – 93 such efficiency measures saved customers a net present
value of almost $2 billion.[4]
Unfortunately free market advocates overturned this program.

In the early 1990’s
there were an array of experiments underway to enable the market for
delivering customer value to function better. Eight states request for
proposals to vendors to compete in an open auction for all ways to make
or save electricity at, say 1¢ per kilowatt hour. On receipt of bids
they signed contracts. If they needed more capacity, they then reopened
bidding for efficiency or supply at 2¢ per kWh, then 3¢. At around 2 –
3¢ they met all of their required capacity, dramatically cheaper than
building a new fossil fired plant.

Some utilities
traded saved electricity, rewarding customers for actively reducing
electricity use, or for saving other customers´ electricity. There is
talk of creating spot and futures, markets in saved electricity (In
1993, Britain created such a futures market). Some electric utilities
sold unregulated electric efficiency in other utilities´ territories.
Some jurisdictions implemented programs to charge fees to connect
inefficient buildings to the grid, and paid rebates for connecting
efficient buildings, both on an open-ended sliding scale.

Cities should
discuss all of these are measures with their utility or Public Utility
Commission.

It is important to
recognize that despite the fixation of utilities and most policy experts
on supplying kilowatt-hours at the lowest price, what customers really want are the
services that energy can deliver at least cost. And it is essentially
always true that efficiency will do this cheapest, most reliably and
with the fewest carbon emissions. Two programs, ENERGY STARÒ,
run by the Federal Department of Energy,[5]
and the
State Scorecard
on Utility Energy Efficiency Programs, run by the American
Council for an Energy Efficient Economy[6]
offer assistance to utilities wishing to create energy efficiency
programs.

Many states are now
reviewing their utility policies. Simply entering “utility efficiency
programs” in Google will return a wealth of information on what
different states are doing. This is now a realm in which policy is
evolving very
rapidly, and a city would be unwise to assume that the past must govern
the future.

In New York, state
regulators have imposed what is called a “system Benefit charge” (SBC)
on all sales of electricity to pay for energy efficiency measures.
Since 1998 most low-income energy efficiency programs have been funded
through this SBC on electricity bills and administered by the New York
State Energy Research and Development Authority (NYSERDA).

The SBC program,
known as New York Energy $mart SM, provides efficiency programs for all
customer classes, including low-income renters and homeowners. The SBC
program was created to
ensure that certain energy efficiency
and energy research programs were adequately maintained during the
state's transition toward a more competitive electric market.[7]

As part
of its utility restructuring, electric utilities in the State of New
Hampshire established energy efficiency programs for statewide
implementation by utilities regulated by the Public Utilities
Commission. These programs serve residential, commercial and industrial
customers. They include programs for new construction, retrofitting
existing structures, and rebate programs for selected lighting and
appliances. In addition to the statewide programs, individual
utility-specific programs exist, including a pilot Pay-As-You-Save
(PAYS) program.[8]

Case Study: SCORE Pilot Program, Texas

TXU Electric
Delivery operates the largest distribution and transmission
system in Texas, providing power to three million homes and
businesses and operates more than 114,000 miles of transmission
and distribution lines in Texas. In 2006, TXU Electric
Delivery's sponsored the Texas Schools Conserving Energy (SCORE)
program, enabling seven participating school districts
representing 95,416 students at124 campuses to save enough
energy to power 376 homes. In 2006, the
programs saved 1,787 kilowatts and 4,257, 483 kilowatt hours of
energy through energy efficiency measures. 95,416 students at
124 campuses In 2007 SCORE will enlist an additional eight to
ten school districts.

SCORE is a
public-private partnership and a component of TXU
Electric Delivery's Energy Efficiency Program, providing
viable energy efficiency and demand reduction solutions for
public schools.
Since its inception in
2006 this program has saved over 350 megawatts of peak demand or
enough energy to power 73,500 homes.
Participating school districts identify the least
energy-efficient facilities and develop an energy master plan so
that they can reduce the district's energy bills. Reduced
energy demand lowers budget pressures, provides infrastructure
improvements, and better learning environments.[9]

When a utility has
achieved all of the cost effective efficiency it can, the next best bet
is often the various renewable forms of supply. Renewable energy
sources include wind, solar power, geothermal, hydropower, and various
forms of biomass. Increasingly, electricity customers are being given
supply options, either as retail power markets open to competition or
when their regulated utilities develop green energy or efficiency
pricing programs. More than 50% of retail customers in the U.S. now
have an option of purchasing a green power product directly from their
electricity supplier.[10][11]

Utilities have
created programs to help finance solar installations on customers’ homes
and factories. For Earth day 2005, Alameda County in California
commissioned a 2.3 megawatt power plant, spread out on roofs all over
the county, using solar cells. It will cut the county’s energy bill
$700,000 a year, and the local utility
paid for half of the cost.

Since 1975, the
city of Santa Clara, CA has taken a leading role in the development and
promotion of the use of solar energy. That year, the city established
the nation's first municipal solar utility. Under this program the city
will supply, install and maintain solar water heating systems for
residents and businesses within Santa Clara.[12]

Utilities across
the country are offering wind electricity to their customers. Fort
Collins was the first utility in Colorado and among the first in the
nation to deliver wind energy to customers. Its Wind Power Program
started in 1998. Strong customer demand expanded the program in 1999
and 2000.

In June 2004, the
program expanded again in order to meet the goals of the City Council’s
Electric Energy Supply Policy.
At that time, the price for wind energy dropped from 2.5¢ per kWh to 1¢
per kWh.[13]

Other utilities
offering wind power include Austin, Texas, Xcel Energy, Basin Electric
in Montana, Oklahoma Gas and Electric, Florida Power and Light and many
others.[14]

Cities can purchase
renewable energy directly. Many municipalities are realizing the
benefits of diversifying their energy portfolio not only by implementing
energy efficiency, but also by investing in renewable technologies
(often called green power). Doing this can strengthen the local
economy, have a positive impact on the local job market.[15]
Using local renewable power also increases the security of the
community.[16]
Fossil fuel generated power generally comes from across state and even
international borders, far from customer demand; whereas renewable
energy sources are mostly smaller in size and locally owned and
operated.[17]

Cities that
purchase a green power product demonstrate increased demand for
renewable technology. Such demand helps to develop further renewable
energy sources, which can reduce the burning of fossil fuels.

Municipal or
commercial utilities can set up green power programs for communities.
In these programs residents have the opportunity to purchase renewable
energy for their homes, businesses, etc. Such programs often charge a
premium rate, although increasingly renewables such as wind power are
cheaper than running existing coal plants.[18]

In a green power
transaction, a utility (or power marketer) buys renewable energy from a
renewable energy facility. This electricity is delivered into the power
pool, where it mixes with all the other electricity being
generated at the time. Finally, the power is delivered to all customers
of that utility. The mix of "green" and "brown" power is actually
shared by everyone while the environmental attributes are credited to
the customers who have paid a premium to create that benefit.[19]

Many cities,
states, federal agencies, universities and businesses have worked with
their municipalities to offer green power purchasing programs.[20][21]
For more information about Renewable Energy Planning, refer to Chapter
5, Long Term Initiatives.

CASE STUDY:
Newark, DE

On January 24,
2005 the
Newark, Delaware City Council unanimously approved a
resolution to increase the city's purchase of renewable energy
to 2% of total electricity use by 2006 or approximately 7.5
million kWh annually. The vote followed a recommendation made
by the City's Conservation Advisory Commission
to increase renewable energy purchases from the current level of
0.1% to 0.5% in 2005 and 2% in 2006. It is estimated that the
purchase will increase the average household electric bill by
14¢ per month in 2006. The city, which operates its own
electric utility and purchases power on the wholesale
power market, currently uses about 373 million kWh of
electricity annually.[22]

CONTACT

Director of
Finance

George
Sarris

(302)
366-7080

CASE STUDY:
Boulder, CO

In November
2005 Boulder, Colorado announced
that it exceeded its goals for a recent campaign designed to
increase the number of residents and businesses purchasing green
power. During the roughly two-month "Wind Power Challenge,"
1,150 customers signed up to purchase wind power from local
renewable
energy suppliers, far exceeding the campaign's goal of 500 new
subscribers. When combined with the more than 5,700
pre-existing green power customers, about 16% of the city's
residents and businesses now purchase green power.
Collectively, these purchases represent
nearly 5% of the community's total electricity needs.

Western Resource Advocates

(303) 444-1188,
ext 221

Yael Gichon

City of
Boulder

(303) 441-1914

On February
10, the
Board of Commissioners of Radnor Township,[33]
a suburb of Philadelphia
with about 30,000 residents, unanimously approved a resolution
to purchase wind energy to meet 62% of the township's
electricity needs. Under a three-year contract with
Community Energy, Inc.,[34]
and the
Energy Cooperative of Pennsylvania (ECAP),[35]
Radnor will purchase 1.4 million kilowatt-hours of wind energy
annually to be supplied by the new 66-MW Mountaineer
Wind Energy Center in West Virginia. The Mountaineer
Wind Energy Center in West Virginia is the largest wind power
project east of the Mississippi River.

The township
is offsetting the added cost of the green power with energy
savings from the installation of energy-efficient LED traffic
lights and competitive market savings from switching its entire
electric load to ECAP.

CONTACT

John Halley

Community
Energy

(215) 778-1133

Alexis
Andrianopoulos

Radnor
Township

(610) 688-5600
ext 179

CASE STUDY:
Los Angeles, CA

In 2003, Los
Angeles Department of Water and Power LADWP decided to purchase
40 megawatts per year of renewable energy from a biomass
conversion facility to be built 150 miles outside of Los Angeles
in Bakersfield. Scheduled to be operational around 2008-2009,
the biomass facility will provide power to up to 40,000 L.A.
homes while consuming around 2,700 tons of organic waste each
day in its anaerobic production facility. The organic waste
will be comprised of landscaping waste materials such as grass
clippings and wood chips. The overall power provided to the
city of Los Angeles
will be around 1.3% of its total needs and cost around $16
million every year.

The project
will also create 54 permanent new jobs and around 200
construction jobs for the two and a half year building period.[37]
This is a great example of closing the materials loop. The
waste materials reacting in the anaerobic digestor will be
supplied by the city. The facility will also provide its own
power.

In 2004 the
city passed a resolution approving a Renewable Portfolio
Standard. The RPS mandates that 20% of the city’s energy
purchases come from renewable sources by 2017, with an interim
of 13% by 2010.[38]

L.A.’s green
power purchasing program operates via voluntary donations from
customers that go toward
purchasing additional renewable energy or building new renewable
energy generation. With current participation, 12,000 homes are
powered with renewable energy, which is enough to spare 101
million pounds of CO2 emissions annually through the program’s
use of clean energy.[39]

CONTACT

Green Power
Team

LA
Department of Water and Power

111 N. Hope
Street, Los Angeles, CA 90012

(800) GREEN
LA or (800)
473-3652

CASE
STUDY: Lenox, IA

The city of
Lenox, Iowa (population approximately 1,401)[40]
is considered one of the greenest cities in the U.S., deriving
around 70% of its energy needs from renewable resources.[41]

In 2003, the
city received a government grant to build a wind turbine that
would supply up to 10% of the city’s energy needs, on top of the
already 60% that is derived from hydroelectric power. Through
the city’s Green Energy Program, 10% of Lenox’s citizens pay an
extra two dollars per month to support the renewable energy
program, making it the most successful city program of its kind
in the U.S.
according to Patti Cale-Finnegan of the Iowa Association
of Municipal Utilities.[42]
Each two-dollar donation produces about 100 kWh and equals a
savings of about 150 lbs of carbon dioxide and 14.6 lbs of
sulfur dioxide.[43]

Lenox had
been planning the wind turbine for a few years before it found
funding for the project. The kick came when the Iowa Department
of Economic Development began looking for a city that might
qualify for a $400,000 grant for community development. In
order to qualify, the city of Lenox
had to have at least 51% of its population as low or moderate
income, which it did.[44]
It also had a viable plan for a beneficial community project at
hand, a perfect match.

The turbine
produces as much as 15,000 kWh per day, garnering a lot of
support for renewable energy within the community. Lenox is now
looking into the possibility of a biodiesel production facility,
and is studying the cost-effectiveness of another wind turbine.
[45]

In recent years activists from San Francisco, Berkeley, CA,
Eugene OR, Boulder CO, Enid OK, Las Cruces NM, DeKalm, Hermon,
Lisbon, Potsdam, and Russell, New York, and hundreds of other
town have pressed for their city to take over the delivery of
electric service. Some succeeded, others decided to stay with
the private utility,
www.local.org/gatekeep.html, 30 November 2006.

In 2006, Xcel Energy was forced to rebate to its “Windsource”
customers, because wind was the cheapest resource on the system.
Recent documents released by the Colorado PUC show that the
utility’s projections that coal power would be the cheapest
resource are wrong, and that limitations to rail capacity haul
coal, rising coal prices and falling renewables costs are
reversing the calculation.

A number of programs or initiatives have been developed in the
U.S. to help address green power product credibility, such as
certification programs and advertising and marketing
guidelines. These programs help to verify green power marketer
claims as well as to educate and inform customers about
environmentally preferable competitive market choices.
www.eere.energy.gov/greenpower/buying/consumer_protection.shtml,
19
September 2006.